How to Turn Down a Bequest

You may wish to decline a bequest if it saves taxes and you are OK with who gets the property instead of you. Learn how to reclaim property.

A disclaimer is your reluctance to accept property that would otherwise be given to you from an estate or trust. It may seem strange to decline property, but you may choose to refuse a bequest if it saves taxes and you are happy with who gets the property instead of you.

If you disclaim the property, it will normally transfer to your heirs as if you had died without a will. Your children and descendants will be your heirs, and if you do not have children, your heirs will be other relatives. In this case, the person who disclaims has control since the property has been redirected to the disclaiming individual’s heirs.

Disclaimed property might also be held by the original owner. (instead of by the persons who would have received it). In your final will and testament (or living trust), you may specify what happens to property if any of your beneficiaries employ this disclaimer tactic. This gives you (rather than the individual who would have gotten the property) authority over where the item goes. You may specify that if your spouse disclaims any property, the disclaimed property will be transferred to a disclaimer trust. The terms of the disclaimer trust may then be the same as those of the credit trust. That is, payments from the trust may be paid for the spouse’s maintenance, and final distributions can be made to your other beneficiaries after the spouse’s death.

There are significant distinctions between credit trusts and disclaimer trusts. The credit trust technique is cautious, ensuring that the federal exclusion for the spouse who dies first is utilized to its fullest extent. The surviving spouse makes the choice about how much to put into the trust under the disclaimer trust strategy. It does, however, leave open the chance that the surviving spouse may make a choice that would result in the loss of part of the exclusion amount.